Standard and Poor’s raises Chile’s credit rating to positive

Risk rating agency Standard and Poor’s has raised Chile’s sovereign foreign currency credit rating outlook to positive from stable, further affirming the Andean nation as a safe place to invest in.

S&P analyst Joydeep Mukerji wrote that Chile’s A+ rating – already being the highest in Latin America – earned the improved outlook after showing greater resilience to pressures such as external shocks and natural disasters.

“We revised the outlook to positive because we believe that many years of prudent economic management—particularly through adverse external shocks and natural disasters—have helped the Chilean economy become more resilient and have given it greater capacity to use countercyclical measures to cushion the impact of such pressures,” Mukherji wrote in a statement from the company. “Chile’s strong financial profile, growing economic stability, and good growth prospects support the positive outlook.”

The ratings on Chile are supported by its responsive political system, transparent and accountable public institutions, impressive fiscal track record, and strong macroeconomic policy coordination, S&P said.

The agency said the positive outlook means an upgrade for Chile’s rating to AA- could be possible if microeconomic reforms, such as steps to strengthen domestic capital markets, were to further improve the country’s economic structure and long-term growth prospects.

Credit ratings prepared by companies such as Standard & Poor’s are an evaluation of a government’s ability and willingness to pay its foreign currency debt fully and on time and is used by investors to realise the level of risk of investing in a country.

Chile, which has had a momentous year that included the election of President Sebastián Piñera, the 8.8 magnitude earthquake of February 27, the celebration of 200 years of independence and the headline-grabbing rescue of 33 miners from the Atacama desert, has seen its economy go from strength-to-strength in 2010.

It rebounded from the earthquake to post a 7 percent increase in Gross Domestic Product (GDP) in the third quarter of 2010 compared to the same period in 2009.

The Central Bank has predicted an increase in GDP of between 5 and 5.5 percent for 2010 and an increase between 5.5 and 6.5 percent for 2011.

Meanwhile, two leading analysts, from the U.S. investment banks Merrill Lynch and Goldman Sachs, now say they expect this growth to continue into 2011, predicting an expansion of 6 percent or more for the year to come.